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7/19/2013
09:56 AM
Eric Zeman
Eric Zeman
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AT&T, Verizon's Upgrade Plans: Insane Choices

AT&T and Verizon debuted early device upgrade plans this week. Avoid them if you value your hard-earned dollars.

Samsung Unleashes New Mobile Devices: Visual Tour
Samsung Unleashes New Mobile Devices: Visual Tour
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AT&T and Verizon Wireless this week responded to T-Mobile's Jump program, which lets customers upgrade to new devices up to twice ever 12 months. AT&T Next and Verizon Wireless Edge both give customers the freedom to pick a new phone after a period of six or 12 months. All three plans cost a pretty penny, but AT&T's and Verizon's are particularly expensive. Here's why.

Earlier this year, T-Mobile ditched contracts and carrier subsidies. Rather than bake the cost of a smartphone into a two-year contract, T-Mobile rolled out the Equipment Installment Plan, which lets customers pay for their handsets over a period of 20 months. The idea was to increase transparency and give customers a clearer view of the cost of their service and their device.

For example, T-Mobile asks customers for a $99 down payment on the Samsung Galaxy S4. It then asks customers to pay monthly installments of $24 for 20 months to cover the cost of the device. T-Mobile did one important thing with its Equipment Installment Plan that makes the whole thing work: It dropped the price of its monthly service plans by $20.

[ Is wireless spectrum a damsel in distress, held hostage by federal government agencies? See FCC Needs To Be A Spectrum Hero. ]

Most customers who walk into a wireless retail store today plunk down $100 or $200 for a new smartphone and walk out with a new phone and a new two-year contract. Smartphones often cost as much as $650. The monthly cost of the two-year contract includes fees so the carrier can recoup the cost of the handset, which is often about $450 over the 24-month life of the contract. In other words, about $20 of the price people pay each month for their cellphone service goes straight to recovering the device subsidy.

T-Mobile then debuted Jump. Jump is a program that lets T-Mobile customers upgrade to a new device up to twice every 12 months. They have to pay a $10 additional fee each month, but are able to trade in their hardware for a new phone and only have to pay the new down payment and adjusted monthly installment when they grab new gear. Because T-Mobile has stricken the device subsidy from its service plans, Jump isn't (too) a bad deal for those who like to get new phones more often than once every two years. It still puts a premium on the device payments, but at least customers aren't paying for the device twice. T-mobile's plan also provides insurance against damaged/lost devices.

Enter AT&T and Verizon.

AT&T Next lets customers upgrade every 12 months. It doesn't require an extra monthly fee, and also kills off the high down payment. For example, the Samsung Galaxy S4 would, under the AT&T Next program, require customers to tack $32 in monthly payments onto their service plan. After 12 months, the customer could choose to trade in their device and upgrade to a new device at no extra cost, other than the revised monthly payments based on the retail price of the new hardware. After 12 months, AT&T customers have paid about $384 for their GS4.

Verizon's Edge plan works a bit differently. Edge allows Verizon customers to finance handsets over time, which can be upgraded as often as once every six months. The finance terms are spread across 24 months. Customers choose a month-to-month service plan and then add the phone of their choice (plus its monthly payments). After six months, customers who want to upgrade to new hardware need to pay off half the retail cost of the phone before upgrading to a new one. After the device is half paid, they can turn it in, choose a new device and start all over again.

For example, if a customer wants a Samsung Galaxy S4, they'll need to make a $27 down payment and add $27 to their monthly service plan. After six months, they'll have paid for about one-quarter of the GS4, or about $162. They'll need to pay an additional $162 to cover half ($325) the GS4's full retail price ($649), and can then pick a new phone.

The important distinction between T-Mobile's Jump program and AT&T Next and Verizon Edge boils down to the subsidy.

Neither AT&T nor Verizon reduced the cost of their service plan to strip out the subsidy. That means if you choose either AT&T Next or Verizon Edge, you're paying for the phone twice. That's a bad deal. AT&T and Verizon should reduce the monthly cost of service plans by $20 to account for the fact that customers are paying for a greater share of the actual device cost, but they haven't and won't.

Smartphones are wonderful and exciting devices. They're also immensely frustrating in that each successive generation arrives every six months or so and leapfrogs the previous generation. That makes waiting two years between upgrades a bitter pill to swallow. It is nice that three of the four major carriers are giving customers the option to upgrade devices more frequently, but a little bit of math tells us that they're really interested in padding their own bottom line.

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AustinIT
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AustinIT,
User Rank: Apprentice
7/19/2013 | 5:27:48 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
The sad thing is... a lot of the AT&T and Verizon faithful will fall for the trick.
I will be looking very closely at what T-Mobile has to offer in my area. This may just be the time to break ranks with the big guys.
Cara Latham
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Cara Latham,
User Rank: Apprentice
7/29/2013 | 4:31:46 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
I agree. Not many people will even know to research these plans, especially if Verizon and AT&T marketing pros make it very appealing.
AustinIT
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AustinIT,
User Rank: Apprentice
7/30/2013 | 12:28:48 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
The new T-Mobile campaign has some very funny ads running on TV now. And, they are getting their point across without directly attacking their competitors. T-Mobile seems to really be upping their game lately.
Cara Latham
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Cara Latham,
User Rank: Apprentice
7/30/2013 | 4:09:56 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
That is interesting. I haven't seen them yet. In which market are you viewing the ads?
AustinIT
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AustinIT,
User Rank: Apprentice
7/31/2013 | 12:40:05 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
Here in central Texas. Some of the spots are downright hilarious.

The campaign features Bill Hader (from Saturday Night Live fame) as the unlucky guy locked in a two year plan on "another" phone platform. He "experiences" the usual problems with aging equipment but is locked in that plan.

My favorite is the one in which his girl friend has an accident and goes to the hospital to get her broken arm treated. She keeps sending him texts about her ordeal but he never gets them. She thinks he is an insensitive nitwit...
Cara Latham
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Cara Latham,
User Rank: Apprentice
8/23/2013 | 9:05:49 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
I have finally seen these commercials! I have to say, the ad campaign for T-Mobile. I think featuring Bill Hader also makes the ad campaign resound more with potential new customers. Smart idea on their part. It still might not be enough for me to make the switch, though.
MedicalQuack
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MedicalQuack,
User Rank: Moderator
7/19/2013 | 5:35:16 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
Don't forget the data selling side of this too..SAP wants to broker Verizon data and split the profits with them..nasty stuff for consumers..

http://ducknetweb.blogspot.com...
TerryB
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TerryB,
User Rank: Ninja
7/19/2013 | 5:46:08 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
And what about the wonderful $36 upgrade fee I now pay AT&T even if user has gone the full 2 years of contract? Did they get rid of that in this new program?
proberts551
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proberts551,
User Rank: Strategist
7/19/2013 | 7:06:09 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
I found that under "The Value Plan" at TMobile you cannot upgrade your phone with a new contract. We have no contract right now, and we own our 3 year old phones. I think the cost of a new phone is a total rip off. No phone is worth 700+ Dollars,
especially in this economy. I can buy a really nice laptop for that!

This is comparable to buying a new computer. The phone prices are WAY TOO HIGH! There are many other places to spend your cash. It will not be in a phone!

I will keep the old one until it turns to dust, unless I choose to upgrade. I will buy a used one that is an upgrade to what I have, but I will not be spending over $100.00 on it.

I see phone sales taking a nose dive in the next few years. People will not have the money, or refuse to part with it in this manner. A phone is a luxury, and I would go with out one rather than shell out big cash.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
7/19/2013 | 8:34:03 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
The Verizon plan seems the most intentionally confusing and manipulative. I'll definitely consider T-Mobile for my next phone after reading this.
Mordock
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Mordock,
User Rank: Apprentice
7/20/2013 | 3:42:42 AM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
I have a 6 year old smart phone (win 6) and no data plan. So if I upgrade, not only do I have to pay for the phone, I have to pay for a data plan on top of it. I have to agree that $600 to $700+ for a phone is ludicrous. You can buy a full blown tablet or notepad for $300, a pretty nice low end laptop or desktop for $500. T-Mobile has the right idea and once they start getting some competition whether from other carriers or simply from other vendors just selling the phones without service, then I expect the price to start dropping rapidly.
Number 6
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Number 6,
User Rank: Moderator
7/22/2013 | 5:59:52 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
If Sprint adopted the T-Mobile Jump plan or T-Mobile adopted Sprint's unlimited data plan, they'd gain a lot of AT&T and Verizon customers.
Cara Latham
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Cara Latham,
User Rank: Apprentice
7/23/2013 | 1:07:03 PM
re: AT&T, Verizon's Upgrade Plans: Insane Choices
It seems all of the big player service providers are implementing some gimmick like this. I will avoid these plans as long as I can. My phone lasted two years, and now that it is time for an upgrade, I wonder whether they will push these special plans in my face. I think keeping the package I have, upgrading now and waiting two years for the next big upgrade is my best bet G as long as that is still an option.
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